Strategy-Formulation Analytical

Framework
SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

SPACE Matrix
Strategic Position & Action Evaluation Matrix

Aggressive
Conservative
Defensive
Competitive
SPACE Matrix

Two Internal Dimensions

Financial Strength (FS)

Competitive Advantage (CA)
SPACE Matrix

Two External Dimensions

Environmental Stability (ES)

Industry Strength (IS)
 SPACE Factors
Internal Strategic Position internal Strategic Position

Financial Strength (FS) Competitive advantage (CA)

Return on investment 5.0

Market share -5.0
Leverage 3.0
Product quality -1.0
Liquidity 4.0
Customer loyalty -1.0
Working capital 3.0
Technology -1.0
3 years income 5.0
Control over supplier & distributor -2.0

5
 SPACE Factors
external Strategic Position External Strategic Position

Environmental Stability (ES) Industry Strength (IS)

Technological changes -5.0 Growth potential 4.0

Rate of inflation -2.0
Profit potential
Barriers to entry -2.0
4.0
Competitive pressure -6.0
Price elasticity of demand -2.0 Financial stability 5.0
Labor cost 3.0
Ease of entry into market 2.0

6
 Steps to Developing a SPACE Matrix

1. Select a set of variables to define FS,

CA, ES, & IS
2. Assign a numerical value:
1. From +1 to +6 to each FS & IS dimension
2. From -1 to -6 to each ES & CA dimension
3. Compute an average score for each FS,
CA, ES, & IS
 Steps to Developing a SPACE Matrix

1. Plot the average score on the

appropriate axis
2. Add the two scores on the x-axis and plot
the point. Add the two scores on the y-
axis and plot the point. Plot the
intersection of the new xy point
3. Draw a directional vector from the origin
through the new intersection point.
 SPACE Matrix
FS
Conservative Aggressive
+6
+5 (1.6, 1.4)
+4
+3
+2
+1

CA IS
-6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6

-2
-3

-4
-5
Defensive Competitive
-6
ES 9
Strategy-Formulation Analytical
Framework
SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

 INTRODUCTION

 BOSTON CONSULTING GROUP (BCG)

MATRIX is developed by BRUCE
HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY
1970’s.

 According to this technique, businesses or

products are classified as low or high
performers depending upon their market
growth rate and relative market share.
THE BCG GROWTH-SHARE

• It is a portfolio planning MATRIX

model which is based
on the observation that a company’s business
units can be classified in to four categories:
 Question marks
 Stars
 Cash cows
 Dogs

• It is based on the combination of market growth

and market share relative to the next best
competitor.
 QUESTION MARKS
High growth , Low market share

• Most businesses start of as question marks.

• They will absorb great amounts of cash if the
market share remains unchanged, (low).
• Question marks have potential to become star
and eventually cash cow but can also become
a dog.
• Investments should be high for question marks.
 STARS
High growth, High market share

• Stars are leaders in business.

• They also require heavy investment, to maintain its large market
share.
• It leads to large amount of cash consumption and cash generation.
• Attempts should be made to hold the market share otherwise the
star will become a CASH COW.
 CASH COWS
Low growth , High market share

• They are foundation of the company and often the stars

of yesterday.
• They generate more cash than required.
• They extract the profits by investing as little cash as
possible
• They are located in an industry that is mature, not
growing or declining.
 DOGS
Low growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in
much cash.
• Number of dogs in the company should be
minimized.
• Business is situated at a declining stage.
Relative Market Share and
Market Growth
To understand the Boston Matrix
you need to understand how
market share and market growth
interrelate.
 MARKET SHARE
• Market share is the percentage of the total market that is being
serviced by your company, measured either in revenue terms or
unit volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year

Leading rival sales this year

• The higher your market share, the higher proportion of the

market you control.
 MARKET GROWTH
RATE
• Market growth is used as a measure of a market’s
attractiveness.

• MGR = Individual sales - individual sales

this year last year
Individual sales last year

• Markets experiencing high growth are ones where

the total market share available is expanding, and
there’s plenty of opportunity for everyone to make
money.
 MAIN STEPS OF BCG MATRIX
• Identifying and dividing a company into SBU.
• Assessing and comparing the prospects of each SBU
according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
• Classifying the SBU’S on the basis of BCG matrix.
• Developing strategic objectives for each SBU.
BCG MATRIX WITH CASH FLOW
 BENEFITS
• BCG MATRIX is simple and easy to
understand.
• It helps you to quickly and simply screen the
opportunities open to you, and helps you
think about how you can make the most of
them.
• It is used to identify how corporate cash
resources can best be used to maximize a
company’s future growth and profitability.
 LIMITATIONS

• BCG MATRIX uses only two dimensions, Relative market

share and market growth rate.
• Problems of getting data on market share and market
growth.
• High market share does not mean profits all the time.
• Business with low market share can be profitable too.
 CONCLUSION

Though BCG MATRIX has its limitations it is one

of the most FAMOUS AND SIMPLE portfolio
planning matrix ,used by large companies
having multi-products.